Macroview weekly news update w/c 15th February 2016

Macroview Weekly News update Your window on the latest trends in Packaged Groceries

Stephen Hall

Friday 19th February

Copyright © 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 2

• January’s retail footfall best in two years • RB reports better-than-expected rise in 2015 sales but cautious about 2016 • Which? survey finds Waitrose is still best physical store whilst Iceland tops online

ranking • EasyFoodstore brings in 10 item limit to deter competition from purchasing stock • Younger shoppers most likely to embrace Amazon as a grocery retailer • Aldi plans expansion, but is it becoming panicked? • SuperValu maintains lead in fast-growing Irish grocery market, whilst Tesco sees

best performance in over three years • Record fall in food sales in Scotland • EU clears Coty's purchase of P&G beauty brands • BHS to scale-up food and grocery offer • Beiersdorf expects improved results after solid FY • Nisa seeing strong own label sales • Asda asks suppliers for help against discounters • Poundland: opportunities beyond £1 • Asda suffers worst ever fall in quarterly sales as Clarke vows to win supermarket

price war

Weekly News Summary –15th February 2016


January’s Retail Footfall Best In Two Years Despite the wet weather in January, retail footfall was 1.2% up on a year ago as shoppers flocked to the shops to take advantage of heavy discounting. The figure was significantly above the disappointing 2.2% decline seen in December, and was the best performance since January 2014 (excluding Easter distortions). The data from the British Retail Consortium (BRC) and Springboard showed footfall in retail park locations increased 5.2% year-on-year, its best performance for two years. This is well ahead of December's 2.1% rise and above the 3-month average rate of 3.0%. High Streets saw their first rise in footfall since July 2013 (+0.2%), significantly ahead of December's 4.0% decline. Meanwhile, footfall growth in Shopping Centres was broadly flat in January, it best performance since January 2014. The data also showed that the national town centre vacancy rate was 8.7% in January 2016, down from the 9.1% rate reported in October 2015. This is the lowest reported rate since the BRC began reporting the data in July 2011. Helen Dickinson, BRC Chief Executive, said: "The improvement in shopper footfall witnessed in January provided a timely and welcome fillip to retailers at the start of the year, with retail parks once again recording a stellar performance. Indeed, this was the best overall footfall performance for two years, and well ahead of the 3-month average. "The further reduction in the shop vacancy rate is encouraging, more so against a backdrop in which online retailing is becoming increasingly popular. However, the fact remains that one in every eleven retail premises in our town centres lies empty. The current business rates system, in which rates bills only ever seem to rise, is wholly inadequate to the task ahead and so it is imperative that the Chancellor capitalises on the conclusion of the review next month to introduce a system which flexes with economic conditions and leads to a substantially lower tax burden." Diane Wehrle, Marketing and Insights Director at Springboard, added: "The increase in footfall across all retail destination types, the first since December 2011, alongside the rise in spending in January, finally demonstrates what is well known - that bricks and mortar shopping environments are still important to consumers. Tracking footfall across 450 individual locations since 2009 has shown that it is the post 5pm period that has been most resilient, with improvements in daytime footfall following on from an increase in activity in the evening. Spend on furniture, and hospitality, led the way, which potentially has longer-term benefits by increasing shoppers' awareness of store offerings and driving up spend through longer dwell times and the "family effect" whereby the family shopping group typically increases transactions values. "The improved vacancy rate is an encouraging sign, but there needs to be caution about being too optimistic as evidence shows the driving force to be an increase in pop-ups and temporary lets in the run up to Christmas and which are still occupied. However, the rationale for pop-ups for many retailers is an exploration of whether there is an appetite for the brand in that location; and an increase in footfall may encourage the conversion of a proportion of these into permanent occupancy, so improving the vacancy position into the next quarter." Source: NamNews 15th February 2016


RB Reports Better-Than-Expected Rise In 2015 Sales But Cautious About 2016 Reckitt Benckiser (RB) has reported a better-than-expected rise in sales for 2015 but warned of tougher trading conditions for the year ahead. The company’s like-for-like net revenue grew 6%, driven by a strong cold and flu season which lifted like-for-like sales in its consumer health division by 14%. Total revenue for the year was up 5% to £8.87bn on a constant currency basis with reported operating profits growing 7% to £2.24bn. RB said growth in revenue and profit was lifted by a strong display across its developed market area of ENA (LFL +5%) and emerging market area DvM business (LFL +9%). It added that gross margin increased by 140bps to 59.1%, with contributions from mix, input costs, and cost programmes. Fourth quarter like-for-like revenues rose by 7%, up from 6% in the previous quarter and better than the 4.4% growth expected by the City. Commenting on the results, Rakesh Kapoor, Chief Executive Officer, said: “RB delivered excellent growth and margin expansion in 2015 as a result of our continued focus on our Health, Hygiene and Home Powerbrand portfolio and supported by our culture of innovation and agility.” However, he warned of possible tougher times ahead, saying: “In 2016, we expect that the macro environment will be tough, but remain confident that our strategic choices across Powerbrands and Powermarkets will enable RB to deliver another year of growth and margin expansion. We are targeting LFL net revenue growth of +4-5%.” He added: “For operating margin, we reiterate our medium term target of moderate margin expansion. We expect this to be supplemented in 2016 by part of the remaining Project Supercharge efficiencies.” Source: NamNews 15th February 2016


Which? Survey Finds Waitrose Is Still Best Physical Store Whilst Iceland Tops Online Ranking Waitrose has ranked number one for its physical stores for the second year running in the annual Which? supermarket survey, while the Co-operative Food remained stuck at the bottom of the table. . Meanwhile, Iceland has overtaken Waitrose and Ocado to top the online store category for the first time. In the survey of 7,009 shoppers, Iceland’s online service was awarded the top customer score of 77% – and achieved five-star ratings for its value for money, offers and convenient delivery slots. With 65%, Asda scored lowest in the online service survey with its customers said to be unimpressed with its website, although it did better in the value for money rating. Waitrose led the in-store shopping table with a score of 75%, increasing its lead over its rivals. It scored highly on the quality of its own label products, staff helpfulness and store appearance. Its online offering also did well, scoring just below Iceland. The Co-operative ranked bottom of the in-store league table for the third year running with a score of 57%. The retailer scored badly on its range of products and offers, with shoppers finding many items out of stock. However, a spokesperson for Co-operative hit back at the Which? findings saying they were “backward-looking” and that service in its stores has been improved considerably in recent times. Tesco also had a disappointing result, despite recent investment in its offer, coming second from last with shoppers critical of its stock availability and staff helpfulness. Overall, the Which? survey revealed the biggest supermarket shopping bugbears, with long queues at the till, items out of stock, misleading special offers and the prices of products changing too often the things that irritated customers the most. Alex Neill, Which? Director of Campaigns said: “While value for money remains a high priority, people want special offers to genuinely be special and they want a pleasant in-store shopping experience. When it comes to online shopping, we know convenient and low cost delivery slots are prominent factors in where people choose to shop.” Source: NamNews 15th February 2016


EasyFoodstore Brings In 10 Item Limit To Deter Competition From Purchasing Stock From today, customers visiting the new EasyFoodstore in north west London will be limited to buying only 10 units of the same item per day in an attempt to deter local stores from buying large quantities of stock to resell at higher prices. . The budget chain, setup by EasyJet founder Sir Stelios Haji-Ioannou, said it was introducing the new rule due to overwhelming demand for its 25p per item introductory offer. For example, one person can now purchase 10 cans of tuna and/or 10 cans of baked beans but no more than 10 cans. A company spokesperson said: “The idea of this store is to specifically target the most needy, not to help out our competitors in the convenience store market.” Amid extensive press coverage of the new store, EasyFoodstore was overwhelmed with customers and was forced to close two days after launch to allow it to restock. The retailer also said that from 1 March, it will be reducing its range of products from approximately 70 down to 40 of the best selling items, whilst a new special promotional price of 29p per item will come into force for the months of March and April. It added that the store will now only open in the week to facilitate restocking over the weekend. Last week it was reported that independent retailers are unhappy that Booker and Bestway are supplying own label products to easyFoodstore, saying it will hurt their businesses. Source: NamNews 15th February 2016

http://www.kamcity.com/namnews/asp/newsarticle.asp?newsid=83827


Younger Shoppers Most Likely To Embrace Amazon As A Grocery Retailer Younger shoppers could hold the key to whether Amazon makes a success of its grocery retail business after new research revealed that 78% of the 18-34 age group say they will probably or definitely try doing their grocery shopping with the online retailer. That’s one of the findings from the latest Bridgethorne Shopper Index from category and shopper management specialist Bridgethorne, which gauges shopper opinions for satisfaction, loyalty and future propensity to purchase. The inclination of the 18-34s to try Amazon, though, isn’t replicated in other age groups with only 26% of the over 55s saying they will probably or definitely give Amazon a go. 22% of all shoppers, though, said that, if Amazon met their expectation, they would do all or most of their shopping on Amazon, showing a level of commitment similar to a strong affiliation to a mainstream supermarket. “We know from other findings from the Bridgethorne Shopper Index that younger shoppers are generally more promiscuous with the type of shopping they do and where they shop,” explained John Nevens, Joint Managing Director, Bridgethorne. “So whilst Amazon has an opportunity to settle them down with new habits and achieve loyalty, they also potentially have a more difficult task in finding what it takes to make this happen.” In terms of factors that are mostly likely to influence a shopper’s decision to shop for groceries with Amazon, price, quality, speed of delivery, range and availability of delivery slots ranked most highly. Barriers to shopping for groceries with Amazon seem to be similar to general barriers to shopping online, including a preference for seeing products first hand, cost of delivery and a general dislike of shopping online. When asked how Amazon might compare with their usual supermarket, most respondents expect Amazon to be on a par with supermarkets. However, across a range of measures, from shelf-life, quality, availability, range and speed of delivery, more than a third of respondents expected supermarkets to be better. Only on price was the response even closer, where 32% felt supermarkets would be better, 23% felt Amazon would be better and 45% felt they would be about the same. “The research doesn’t suggest any expectation among shoppers that they will receive a superior of distinctive offer from Amazon,” added Nevens. “Those less inclined to consider shopping with Amazon tend to be older, which may be a symptom of their reluctance to change long held shopping habits. Appealing to both younger and older age groups, though, may be critical for long term success and this may only come from understanding the perceived barriers and addressing them.” Source: NamNews 16th February 2016


Aldi plans expansion, but is it becoming panicked? Aldi’s new advertising campaign has been labelled “misleading” by analysts, just as the company sets out to create 5,000 new jobs. Aldi has laid out a plan to open 80 new UK shops, the latest phase in an expansion plan which has seen it secure its place as a thorn in the side of traditional supermarkets. The discounter has plans to increase its number of UK stores by 100 by the end of the year, and to have 1,000 by 2020. However, Aldi’s most recent campaign, in which it compares its own prices to that of rival Morrisons, has been called “misleading”. “We see this defensive and arguably misleading advertising campaign by Aldi as a sign of such panic and other recent activities,” said Bernstein Analyst Bruna Monteyne. Indeed, Aldi was quick to compare its prices to Morrisons in terms of “price per pack”. However, as pointed out by The Telegraph, this involves no distinction between brands, and so Aldi could highlight a price difference between the lowest value option in any given range with the highest value alternative offered by Morrisons, such as Aldi’s Norpak butter compared to a tub of Lurpak at Morrisons. Analysts have called this comparison of own label products with well known brands as “disingenuous”. Aldi boss Matthew Barnes also pointed out that, while most major supermarkets sell more than 25,000 products, Aldi sells only 1,500, and so saying a certain percentage of products have been reduced could be interpreted as highly trivial. No official complaints have yet been launched against the advertisement to the Advertising Standards Authority. Source: Retail Gazette 16th February 2016


SuperValu Maintains Lead In Fast-Growing Irish Grocery Market, Tesco Sees Best Performance In Over Three Years The Irish grocery retail market has continued its strong growth into the new year with SuperValu maintaining its lead and Tesco seeing its most positive performance Tesco since November 2012. . The supermarket share data from Kantar Worldpanel in Ireland for the 12 weeks ending 31 January show shopper spend increased by 3.8% over the period, a slight improvement on the 3.5% growth seen over the Christmas period. Georgieann Harrington, insight director at Kantar Worldpanel, explains: “The increased consumer confidence we saw over Christmas has continued, with little indication that shoppers are tightening their belts after the festive period. Combined with a 0.4 percentage point increase in price inflation over the past 12 weeks, this means that consumers have been spending more on their grocery shopping than this time last year.” SuperValu remained Ireland’s number one retailer, capturing 25% of the grocery market. Impressive sales growth of 4.4% saw the grocer perform ahead of the market, increasing its share from 24.8% last year. Shoppers visited the retailer nearly 21 times on average in the latest period – more frequently than last year – spending an additional €27 with SuperValu as a result. Meanwhile, there was more good news for second-placed Tesco with it continuing its recent recovery in the Irish market. Whilst its market share was down from 25.2% last year to 24.5% in the latest period, the chain saw sales growth of 1.1%. This was its most positive performance since November 2012, suggesting price cuts and improvements in its offer are tempting shoppers back to its stores. Meanwhile, Dunnes enjoyed the strongest rate of growth of the top three supermarkets with sales up 5.1% compared with last year. This is due in part to larger shopping trips with Kantar Worldpanel saying the chain has successfully encouraged shoppers to spend an additional €1.70 on average every time they visit the store. Amongst the discounters, Lidl continued to lead the way with it posting double digit growth for the fourth consecutive 12 weekly period. Kantar Worldpanel said the retailer is successfully driving growth across the board, with a higher number of shoppers visiting its stores more often and spending a larger amount each time. In comparison, Aldi’s growth was relatively slow with sales 2.9% higher than in 2015. The main growth driver for Aldi was an increase in customer numbers: almost 65% of all Irish households visited the retailer within the past 12 weeks, compared with just shy of 63% a year ago.” Kantar Worldpanel’s data showed that grocery market inflation stood at 2.4% for the 12 week period, up from 2.0% in last period. Source: NamNews 16th February 2016


Record Fall In Food Sales In Scotland Latest data from the SRC and KPMG show the Scottish retail sector had a disappointing January, compounded by a record fall in food sales. With some of the wettest January weather for decades deterring shoppers from visiting stores, total Scottish retail sales last month decreased by 3.8% compared with January 2015, when they had declined by 2.3%. This was the weakest store performance since April 2012, but follows the best performance since January 2014 in the prior month. Like-for-like sales decreased by 4.0% on last January, when they had decreased by 3.1%. Adjusted for deflation measured by the BRC-Nielsen Shop Price Index (SPI), total Scottish sales decreased by 2.0%. Total food sales were down 5.8% down on January 2015, their slowest year-on-year performance on record. Meanwhile, adjusted for the effect of online sales in Scotland, total non-food sales increased by just 0.2%, their worst performance since October 2015. David Lonsdale, Director of the Scottish Retail Consortium, said: "There is no denying that these are dour retail sales figures for January, showing a decline of two percent even once falling shop price inflation is taken into account. After the excess of the festive period, which saw solid retail sales growth in December, shoppers were clearly keeping a firm grip on purse strings and wallets in January even as footfall improved. "Food sales plunged last month, albeit after a strong showing the previous month, and at a faster rate than the 3-month average. The total year-on-year change of retail sales of non-food items dipped too. However, after taking account of the trend for online purchasing and discounting by retailers to shift stock, non-food sales remained positive. In fact, the 3-month trend for online adjusted non-food achieved its best performance since September 2015. Other non-food was the best performing category from an otherwise drab overall set of figures, with sales of larger furniture items holding up well. Clothing and footwear followed closely, with winter clothing, boots and sport shoes amongst the stand out performers during the month. "With the Chancellor's Budget just a month away and the publication of the Holyrood election manifestos almost upon us, Scotland's retailers will be looking for measures which will further improve consumer confidence, boost disposable incomes and keep down the cost of living. With half of VAT receipts being assigned to the Scottish Parliament our politicians at Holyrood have a direct stake in facilitating a flourishing retail industry." David McCorquodale, Head of Retail at KPMG, added: "Storms battered the Scottish high streets in January, resulting in the weakest performance for some time and a washout to start 2016. With the month producing 145% of average rainfall and only 63% of average sunshine, it was one of the wettest and dullest Januarys for a century. As a consequence, total sales were down by 3.8% compared with last year. "Food sales were particularly badly hit, falling by 5.8%. Having enjoyed one of its best months for a couple of years in December, the grocers will be hoping figures for January were a consequence of the deluge rather than the post-Christmas diet. Even with the benefit of adjusting for the effect of online sales, the weather put the brakes on recent growth in non-food sales, which increased by only 0.2%. "With an election looming and ongoing challenges in the oil and gas industry, the Scottish retail sector will be looking to the Government to find ways to encourage consumer confidence and to alleviate unnecessary burdens on retailers. They will also be hoping the latest sales decline was genuinely weather related rather than consumer malaise."

Source: NamNews 17th February 2016


EU clears Coty's purchase of P&G beauty brands The European Commission has approved Coty’s planned acquisition of P&G’s beauty businesses. The organisation ruled that competition in the industry would not be threatened by the deal. Coty already has approval for the deal in the US. The Commission stated: "The European Commission has approved under the EU Merger Regulation the acquisition of Procter & Gamble's beauty products businesses by Coty. The Commission concluded that strong independent players would remain active in all the concerned markets.” The commission ruled that competitor companies including Cosnova, L’Oréal, Avon, LVMH, Puig and Unilever, among others, would continue to give consumers a vast choice following the deal. It stated that competition would remain “sufficiently strong” to prevent any price increases for consumers. Coty is due to complete its purchase of P&G’s perfume, hair care and make-up businesses for $12.5bn in the latter half of this year. A detailed timeframe for the merger is expected to be announced in May. The transaction is thought to be one of the biggest purchases the beauty industry has seen in recent years and will more than double Coty’s current size. The deal will make Coty the largest perfume brand ahead of L’Oréal and the third biggest make-up brand, just behind L’Oréal and Estée Lauder. Source: Cosmetics Business 17th February 2016

http://www.cosmeticsbusiness.com/news/article_page/PG_accepts_125_billion_Coty_offer_for_43_beauty_brands/110187


BHS to scale-up food and grocery offer Press reports have revealed that high street department store operator British Home Stores (BHS) is to invest a further £10m in developing and rolling out the food and grocery offer first piloted in three stores in 2014. The introduction of the food and grocery ranges is part of a turnaround plan to revitalise the core BHS offer focused on clothing and homewares. Potential for up to 140 stores It is understood that around 140 of the current BHS stores have existing permissions to sell food ranges, with the fascia having included food in many stores in the past. With an estimated 27 stores including food to date, its has been planned to add 50 more in early 2016. The food sections installed are averaging 3,000 sq ft and including 3,000 lines largely sourced from leading UK wholesaler Booker, and aimed at meeting the needs of convenience shopping missions. Commenting on the trials to date Darren Topp, Chief Executive said: "In those stores where we have put food in, we have doubled the footfall and, consequently, we get a halo effect across the rest of the store." Source: IGD17th February 2016


Beiersdorf Expects Improved Results After Solid FY Beiersdorf has said it expects underlying sales growth to improve in 2016, even as it reported a solid set of results for its last fiscal year. For 2015, underlying sales rose by 3%, while they were up 6.4% on a reported basis. Meanwhile, underlying operating profit grew by 12% to €962m. Sales were helped by a strong 11% jump in Latin America, as well as improved results in China. Beiersdorf said it expects underlying sales in 2016 to grow by 3% to 4%, while underlying operating profit margin is expected to slightly rise above the 14.4% it recorded last year. Source: NamNews18th February 2016


Nisa Seeing Strong Own Label Sales Nisa has revealed robust trading figures for its Heritage own label range. Sales of range grew 11.24% in value and 7.73% in volume terms during the third quarter of its 2015/16 financial year when compared with the same quarter in 2014/15. Nisa recently reported strong sales for the 10 weeks of Christmas, boosted by the success of its Heritage range which saw sales jump 23.15% in value and 16.38% in volume versus the same 10 week period in 2014. Nisa now offers its retailers a range of over 800 Heritage lines across three tiers - Heritage Pantry, Heritage and Heritage Gourmet. “We’ve been delighted with the performance of Heritage since its relaunch. It continues to grow in popularity and sales on a week by week basis,” said Erin May, Heritage brand manager. “Christmas sales were particularly strong driven by the increase in product quality and a more premium look and feel, meaning consumers were more inclined to buy Heritage for the important feasting occasion.” She added: “The Heritage range is one of Nisa’s key USPs, suitable for both symbol retailers and those trading through Nisa’s independent and specialist business unit. We hope 2016 will prove a successful year for Heritage, with a big push to drive brand awareness and sales.” Source: NamNews18th February 2016


Asda asks suppliers for help against discounters Asda has been meeting with individual suppliers to seek help in competing with discounters. The Walmart-owned supermarket chain has sought help for lowering its prices in the face of increased competition from the likes of discounters Aldi and Lidl. Working closely with Groceries Code Adjudicator Christine Tacon, the chain is understood to have asked for discounts and contributions potentially worth millions of pounds. “This isn’t Asda coming in with a big bat and trying to make suppliers hit a particular price point,” said Andrew Moore, Chief Merchandising Officer at Asda. “We are talking to big suppliers about what we know customers want in terms of range, assortment and quality and working with them to provide that.” An industry source told The Guardian that suppliers are being asked for “significant amounts of money” from Asda. “Individual suppliers are being asked for millions and pounds and asked what they want in return.” Like others, Asda has struggled to overcome competition from discounters, and has been engaged in an ongoing ‘price war’ with its rivals. Recently, the chain pledged to make sure its prices are only 5% higher than Aldi and Lidl. However, as evidenced by Aldi’s most recent campaign, the discounters are more than willing to reinforce the gap in prices between themselves and the Big Four. Alternative options are also being explored, according to Asda. To reduce the price gap it has also been considering cheaper packaging, ingredients sourcing or simply narrowing its product range. According to the company, some categories could be cut by as much as 25%, though the average will be 10%. “Value is an important part of it. You can see what’s happening with the discounters and other competitors,” said Moore. “We have got to make sure our customers are getting the best value we can give them.” In autumn 2015 the chain hired Bain & Company to adapt and streamline its ranges to suit customer needs. Asda is expected to reveal its sixth consecutive quarter of decline in its upcoming financial results. Source: Retail Gazette18th February 2016

http://www.retailgazette.co.uk/blog/2016/02/aldi-slashes-prices-in-face-of-competition

http://www.retailgazette.co.uk/blog/2016/02/aldi-slashes-prices-in-face-of-competition


Poundland: opportunities beyond £1 The IGD explore the opportunities for new and existing suppliers to grow with Poundland as the discounter ventures beyond the its signature price point. 1. Special promotions Poundland is evolving its £1 business model in-store with Special Promotions that allow shoppers to buy round-pound products above the £1 price point, with the condition of spending one pound. Having trialled the promotion, Poundland is now making the products more prominent in-store by giving them dedicated space, as opposed to behind the till where they have previously been merchandised. This venture into selling bigger ticket items poses a greater opportunity for suppliers to trade with Poundland and get their brands noticed. The promotions are supported with strong marketing both in-store and online, showing how Poundland is dedicated to driving volume on these lines. 2. Online Poundland's ecommerce website is a key platform for the retailer to promote Special Promotions in its 'Promotions and Offers' section, and unlike in-store, there is no conditional spend. Current categories featured online with prices over £1 include fitness, fragrance & gifts and home & garden, however there are opportunities across all categories, including food and drink. Suppliers are encouraged to engage with the Poundland team to understand what opportunities can be unlocked by not only the special promotions online, but also the case deals that Poundland offers its online shoppers. 3. Multi-price fascia As Poundland rapidly grows its estate following the 99p Stores acquisition, it also looks strengthen its position in the UK discount market. Within the next few months, Poundland will be launching a new fascia that will have a similar model to Dealz: its multi-price format that trades in Ireland and Spain. While the majority of the products in Dealz stores are priced at €1.49, the value offer goes beyond that with products at higher price points. The multi-price format creates a key opportunity for suppliers to sell more products with Poundland, in the UK and beyond, which in turn allows the retailer to meet more shopper missions and increase the average transition value. Source: IGD18th February 2016

http://retailanalysis.igd.com/Hub.aspx?id=14&tid=1&rid=444&prid=1822


Asda Suffers Worst Ever Fall In Quarterly Sales; Clarke Vows To Win Supermarket Price War Asda’s Chief Executive Andy Clarke yesterday vowed to win the brutal supermarket price after reporting its worst ever quarterly sales performance as shoppers shifted spending to rivals over the Christmas trading period. . In its fourth quarter covering the 13 weeks to 1 January, the group posted a worse than expected 5.8% fall in like-for-like sales which to a degree was impacted by Tesco’s recovery. The group also blamed the underperformance on its decision not participate in Black Friday promotions or match the Christmas promotions by some of its rivals. The latest figure compared with a 4.5% dip in its third quarter and meant like-for-like sales for the year as a whole were down 4.7%. Clarke described 2015 as a “difficult year”, again highlighting the significant structural changes taking place in the market and intense competition from the discounters. He said: “In that context, our results for the year have been commendably stable, balancing investment in our customers with disciplined financial management in a period when many of our competitors have suffered severe falls in profitability. We have steered a careful course through this very turbulent period for the industry and through a complex set of challenges.” Clarke warned that the difficult conditions will continue for foreseeable future with the chain expecting to see further falls in underlying sales. However, he dismissed the short-term, unprofitable tactics being used by rivals to win over shoppers, saying the business had a clear strategy in place to reaffirm its proposition as the UK’s lowest price, full range supermarket business. “In the long run we’ll win in this market,” he said, adding: “We have identified what we have to do to reposition the business to recover sales and have already taken decisive action through Project Renewal.” As part of the extra £500m it pledged last month to spend on price cuts, the group yesterday revealed the first round of this year’s investment. Under the new strapline ‘Pocket More’, Asda has lowered prices on a further 1,600 lines to ensure their undercut Tesco, Sainsbury’s and Morrisons. Clarke said this investment was also another step in narrowing the price gap to the Aldi and Lidl which now stands at around 11% compared to 23% two years ago. His aim is to get within 5% of the discounters. Clarke went on to explain that other key actions under its ‘Project Renewal’ strategy launched last October include fundamentally changing the way the retailer buys products to deliver better volume and drive lower prices. As previously reported, it is also simplifying the business and driving operational efficiencies. This began with Head Office structures last month and a review of its store services. Asda is also reducing product ranges to remove duplication, whilst 95 of its largest stores are being modernised with new improved layouts and changes to merchandising. Clarke concluded: “Our strong financial position has allowed us to take bold and fundamental decisions about the way we need to run the business. We have taken control of our own destiny, and are not at the mercy of market pressures or whatever our competitors feel is necessary. While I am cautiously optimistic that our sales will gradually improve, it won’t happen overnight given that 2016 is likely to be another tough and competitive year for the sector as a whole. “Project Renewal is the right strategy to get us back on the front foot, using our market leading value proposition to give our customers low prices and unbeatable value. That has been Asda’s successful proposition over the last fifty years and that’s what will deliver sustainable growth in the long term. “

Source: NamNews19th February 2016


Latest annual performance

Source: IGD Research, 2015 Channel Forecasts, years to April

2015 % change vs. 2014

Discount channel value

£12.8bn +18.5%

Share of UK grocery market

7.2% +1.0ppts

UK Discount Snapshot, February 2016

Behind the headline numbers:

• Discount remains the fastest growing channel (as per last three years)

• By 2020 the channel will reach £23.2bn, +£10.4bn cash growth

• This equates to 11.6% share of UK grocery market (vs. current 7.2%)

• Growth drivers: store openings, format development, increased penetration as appeal broadens and quality perception improves

1. Discount players online • In September 2015, Poundland launched online offering its full in-store offer as well as case deals on certain

lines. There is no minimum order value, however a £4 flat delivery fee will be charged, while orders over £50 will receive free delivery

• Aldi UK made a move online in January 2016 with its ‘wine by the case offer’. Specialbuys, Aldi's weekly offer of mainly non-food items, will be added to the site between April and June 2016

2. Improving store standards • Lidl is making significant strides to improve the look and feel of its stores, investing £1.5bn in its UK estate. The discounter has begun the

rollout of its ‘stores of the future’ format which incorporates new signage, self-checkouts and customer toilets

3. Expanding the estate • Aldi aims to open 80 stores in 2016, taking the estate to c.700 stores. The stores will be served by the growing infrastructure of regional

distribution centres, with the next one due to open in Cardiff in 2017. • Home Bargains owner TJ Morris has opened a second distribution centre in Wiltshire, spanning 1m sq ft to serve many of the 50 stores

per year it plans to open as it focuses on the south of England • Through its acquisition of 99p Stores, Poundland has increased its estate by 40%, taking its stores number in the UK and Ireland to over 850.

Source: IGD Research

What’s happening – 3 themes

Macroview Weekly News update Your window on the latest trends in Packaged Groceries

Stephen Hall

Friday 19th February